tv Response CSPAN November 10, 2013 12:30am-1:31am EST
we are the feminist activist and the founder of ms. magazine. secondly, i would like to present our guest with the national press club coffee mug. >> inc. you so much. one must question. the questioner wants to know what are you on betting? >> i do what i'm told. but i will tell you what i am betting. i bet that in 20 years, every america willoom in be to child the brain works to children. [applause]
>> take you. thank you so much for coming today. i would also like to thank national press club staff, centerng our journalism for organizing event. you can find more information --ut the national close press club on our website. thank you. we are adjourned. [applause] >> on this weekend's newsmakers, iowa senator chuck wesley is our guest. he talks about some of the issues rating -- facing congress. he is the top republican on the judiciary committee and one of
the conferees working on a budget proposal for 2014. here is a reef look at the interview. -- brief look at the interview. >> i do not believe will be easy for us to make an agreement between the republicans and the democrats. because the democrats want to increase taxes they want to -- if there's going to be in agreement, it would have to be are agreement -- if we willing to give something up on sequestration, but only if there is a long-term agreement on medicare and social security. can that happen? i am very pessimistic. but i know republicans are going to try to work in that direction and i know that congressman ryan is working very closely with patty murray of the senate committee to get in that direction.
but it is a tough road to hoe. -- row to hoe. >> iowa senator chuck grassley. you can watch the entire editor tomorrow at 10:00 -- interview tomorrow at 10:00 eastern. >> is a pakistani, i am pirg certain -- i always want pakistan to overcome its issues. i want good relations with the u.s. lovet is not just for good -- pakistan has to realize as a canon that no other nation make you bigger than your neighbor. i's size is an advantage. -- india 's size is an advantage to india.
now pakistan needs to trade with everybody in the neighborhood. address its economic dysfunction. put its children into school. make sure that its population continuecontinue to -- to rise faster than economic growth. none of those things can be addressed just by building that's relations with the american military. >> the former pakistani ambassador to the u.s. on the painful history of u.s.- pakistani relations. just part of book tv on c-span two. houset, former white officials talk about the response of the 2008 crisis.
they talk about the creation of the asset relief program or tarp which totaled $700 billion in government aid. this is from the university of chicago. it is one hour. >> we have a remarkable panel here. what i imagine will be a terrific conversation that we will have. we'll try to get to the audience as quickly as possible. this panel and discussion is about politics of responding to a crisis. the bailout. i want to start if i could with the mayor. he was not the mayor at the time. i want to think about tarp for a second. tarp 2008. i want to ask you this political question. we'll go back to five years i am sure. if you could pretend unfortunately that we were in
the soup all over again, in the midst of this financial crisis, given the shifts in washington, and the polarization of a country, my question is whether you believe congress, the senate, the president today would have been able to pass something like tarp? >> no. >> no? >> let me give the reason why and walk you through. that is the small n, not a big n. i do not think it is fully appreciate at the time and still not now. think about this. first of all, when hank paulson and ben bernanke and commissioner cox came to the
hill, two months since you have political, not finance. two months before a presidential election. you are two months before the entire house of representatives is up. and one third of the senate. and given all of the feelings that were happening going into the last seven years. i think people underestimate the weight that the democratic congress acted that time responded to the national crisis. we did not say this is your problem or fault. we got told we have 48 hours to deliver $700 billion to the banks no question is asked. while we work through that issue, we stood up our responsibility to the country regardless of the looming election. it could've been put on the
president and the other party. we did our job. i do not think the congress today under the stewardship of the leadership, not to make a partisan point, they gave you a lot of that. i can make a lot more parts imports if you like. if the last two weeks have not taught you anything, i have a bridge you can buy. my point is, i do not think -- i remind everybody. when the tarp got voted on the first time it went down because of the podium votes. they do not stand behind george bush. if this crowd will be more understanding, the answer is no. >> senator? >> i know there is great a danger in disagreeing with the mayor of chicago. >> your flight is now canceled. >> it is taken on a different meaning for me. [laughter]
i have to knew once his answer. -- nuance his answer. the dysfunction is inexcusable at many levels is artificially driven today. the crisis are politically created. this was a real crisis. it was as deep and serious an event that the congress has faced in my lifetime. and the language which was used by secretary paulson and ben bernanke when they came up and briefed the negotiating teams on that thursday night was start, start -- stark, stark. a wilderness at that point to put aside the politics and reach an agreement -- a wilderness at that point to put aside the politics and reach an agreement. -- willingness at that point to put aside the politics and reach an agreement.
barney was on that side -- there were big ideological questions. it was never an issue of politics. because the crisis was really. i do think that comes would react again in that way. the people are fundamentally good people. if there's a genuine crisis of substantial, you can still do some. >> i disagree completely. remember that even then with george bush as president, the majority of the republicans if on the second vote of voted no. even if the stock market had done the worst thing and they yelled at paulson and they voted no. i said the house republicans. >> a 100 foot wall.
>> it was not just the economist, a difference between the presidential candidates. we were not stupid. we knew what was happening. the tarp would go down as history as the highly successful, most unpopular thing the federal government has done. we knew that going in. we had the partisanship and a fundamental difference between the house republicans not too much in the senate. it takes longer. and the democrats. and it was inconceivable that the house republicans today would have responded in that way. it is more partisanship. partly the democrats believe more that is the political disadvantage we have. again, a majority even after the
stock market fell by seven plus points voted no the second time around. >> well, when we were in the room with hank in the side room of the conference room, it was you, hank, myself, and barney. house republicans did not believe in it. first time it went up for vote, the majority of house republicans voted no. as a drop in the market. i still voted no. i do not know why you think this congress all of a sudden would be more amenable to a crisis in the congress that cited that. >> fundamentally ideological. the republican party at the time and i honor their integrity, yes i'm a it could be a bad thing but it is government intervention and i disagree.
it is even stronger in the house republicans today. >> george bush gives credit for rising above the party. >> absolutely. >> i do not -- i would not get too many words in here. [laughter] i do believe -- it'll direct at you, not me. i do believe we are still governed by people who are committed to a better america. if confronted by a crisis whether pearl harbor or basically the fiscal equivalent of pearl harbor, people will step up. >> let me ask you this neel. >> the last thing you will be saying. [laughter] >> i just want to get -- [laughter] qwest will listen to every word you say now. you work on a document in april
of 2008. several months before we landed in the soup. you met with ben bernanke and you had a plan in place. close to what came to be the plan. given that you saw it and give you credit for seeing a problem was on the horizon, do you think if there was a lesson in this that you could have, should have gone to congress can? maybe not for tarp but for some ability to wind down and institutional stop you have to get there early. >> the problems as my colleagues are talking about is we knew -- go back to american history. look at one example when our democracy has prevented a bad outcome. it is great at cleaning up a mess after it has happened. think about climate change. how hard it is to get you to agree if it exists.
and who should pay for preventing it? account was for us is would you send the treasury secretary and the fed to the congress to cut they will have to raise their right hand and say if you do not give us this authority, we will be in the great depression. they go up and raise their right hand and say that, and the congress says no. that crisis of confidence triggered by the very act could precipitate the crisis we are trying to prevent. our catalyst was we can only go when we have maximum chance. this was not a grand strategy. it took a lehman types of and. >> it is true. i had just become the chairman and 2007. my republican colleagues forgotten they had run the congress until 2007. two thousand 3, 2000 4 -- i was a minority. tom delay would not consult me.
hank talked about this. i do not angle we could do it. here is where we were. there was partisanship. as i did not think we could do it. you have the chairman, a very honest, deeply conservative man. i spent much of 2008 defending hank and been -- ben. they wanted to have hearings. over bear stearns. that was hard enough to get it done. i agreed with them. it was no way that the resolution procedure with intervention that we had in there. ss the government will come and take it over. it would not have flown. i want to add this. sometimes we make a mistake. it is driven by the perceptions of voter sentiment.
the tarps a great success but hated. we politicians, the media, it makes me nuts. the voters are no picnic either. i used to say that when i was in office. barney had a quote. the stitches are not so hot. -- the constituents are not so hot. >> you have this ideological tremendous intervention. you step in and to get rid of the board of directors and you fire people and you take the shareholders' money. it was a hard enough job for me as chairman. i would never want to put it to a vote of the action by the fed being so active. it would've failed in committee. >> you famously have said you never want a serious crisis to
go to waste was dubbed i believe kristi -- waste. -- doubly kristi made a comment. somebody asked what that meant and -- >> i do not know. >> a given we are five years after a financial crisis, the frustration in the country, the fact barney has said tarp may have been successful but deeply unpopular, to the crisis go to waste but mark sump -- waste? the program was not popular. >> i made two points. we are here to talk about the financial crisis. landing on the president's desk was a crisis. in of the transition, i went to
see president bush. they worked out, $24 billion to the automobile industry. that gives the auto industry, gm/chrysler. we are going to give them six weeks of arriving room and that is all. now, bailing out the auto industry was as unpopular as billing out the financial -- bailing out the financial sector. we have cleaned up the auto efficiency which was delayed for 30 years old up 60 -- 30 years. they are profitable now. more people working in the auto industry including suppliers today than the price before hand. that is a crisis and all the decisions -- making sure the
financial community and the organized labor, everybody is in the game and has a hand on the bloody knife. the auto industry is a lot more competitive than it was pre- crisis. that was the crisis in use to resolve a decades long the decisions that were deferred and delayed and finally made. on the financial side, i think we are far better than where we were at the beginning. there are some things that need to be done. i would include the auto industry which is more competitive than before. i will give one example. the ford auto plant in chicago added a third shift, 1200 jobs, 900 suppliers. the plant that exports to six in seven countries more than any other ford in the united states.
that is a rebooted, retold industry. you cannot to do without a crisis. >> in retrospect and i ask this of everyone, wasn't there a way to make tarp more clinically palatable? i didn't know if would ever be popular. what could you have done differently? >> i did have a bumper sticker that i use in 2010. i was persuaded not to. it said things would've sucked worse without me. [laughter] the political slogan. that was true but not helpful. two things. one that people think when they have both would not have been -- it would've been helpful would i have been.
too disagreements. one was whether it we should go over the bonuses will stop -- bonuses. the single biggest point that on was overwhelmed us was during the aig bonuses. the mob was in the street with pitchforks. i worried about our capacity to govern. we could've done more. the only thing and hank thought it was important to get the money out. the second inc. is why did you do more to use the money for mortgage? we had of the argument. i had helped to sell the bill to democrats. we would have mortgage relief. we have to give this money out of locating it -- complicating it. a legitimate difference of opinion.
the first 350 went out. i remember saying to hank, it is good public policy. obama said, ok. what people should look at is the extent to which this was affected by the fact that some the most important decisions taken by the government was taken during a transition. when i asked the obama people, the response was i got back, we only have one president at a time. i was a little frustrated. i thought it was overstated the number president we had at the time. [laughter] here is the deal. i wish with done a mortgage. the people thought it was popular is wrong. those are strong conservative argument. i pay my mortgage, why are you taking money.
there were some people who bought a house. and it went up and property. and they took out a home equity loan and bought a boat. in the end, that was not much more could've make it more popular. >> fundamentally, there's a belief of fairness. you take a risk and you bear the consequences. we had to violate that in order to save the economy. when you violate the core beliefs and it leads to great anger. whether congress today would be to act, the fact that congress is so polarized is a result of the actions we had to take into thousand eight. not a fair question to put the congress in the position. we created this. >> 2 things. you cannot take a $750 -- $750 billion bailout and make it popular. not possible. not possible.
it was ugly. it was going to stay ugly will stop -- ugly. it was fundamentally ugly. you had to overwhelm the system politically because you thought the end goal is more important. >> can i add one thing? it was taken as close to an election as possible. >> i do not think this congress is a reflection of those decisions. i say this about redistricting. the system is set up for the voters to take a representatives. that's why you have a dysfunction. it is turned the system upside down. >> what we could've done, we should not have chosen a four letter word to be the acronym.
the term became a means of itself. the relation to the legislative vehicle. the timeframe was so condensed and the crisis so acute, we do not have the time to do the politics. if we had at the time, we could've made a good case that the folks on main street were the ones in this was about. not the banks. when you went to your business, that would not have enough business to open. you are not to be able to go to your bank, it would be close. we do not have the time. >> at the time -- >> i would like to give my time to neel. >> at the time the vote went to down, i would argue that you and the president -- and then senator were very magnanimous about pursuit tarp and support tarp. when you tell about the
popularity or not there could be an argument made that electronic wasn't the president became the president, he made a number of calls calling the bankers fat cats and making a number of comments that were somewhat prejudicial around tarp and the recipients that some people would argue made of the program less popular. do you buy that? >> and no. i want to agree with what i said in a moment ago. the program was not popular. we are two months before an election. i'm a proud democrat. i put my political aside. with barney, we were the two point people for the democrats. entire house of representatives.
i didn't act in a sense of partisanship. >> i agree. i agree. >> number two, the president in his first speech to congress said he would ask for more money if it was necessary. not to just under tarp. we had a big debate in the white house -- we may have needed more money. the market needed to hear that he was willing to go went get more money. to stave off the need of the pre-crisis need for that. he came to the aid of the fed. bankers are not the financial system. do not confuse the two. he was willing to spend political capital on the thing that was very unpopular and ask for additional resources.
he said that in his first address to the united states house of representatives. the issue he brought up as it relates to compensation and bonuses was the first issue when we were first debating. he did not say anything that has not been set prior to that. >> i think you have the cause and effect backwards. the anger over the money being given to the banks was enormous. a large number of people were losing their homes. intervening to help people foreclosed upon was a much more controversial issue than people thought. do not give them money. they do not deserve it. it is moral hazard if i stop paying my mortgage. why should i pay on time? obama having defended this policy of giving.
we knew what was loans. the we couldn't be sure if it would be repaid. giving money to people who had been part of the problem. his criticism was probably a political necessity on his part. it was an effort to drain off >> i will say, i am sure my own mind we have two times here. you will hear this. chris got unfairly blamed does he try to stop the bonuses. angers when all of the was unleashed. >> but hatever political demonization happened, whether it was necessary or not, my question, i go to you, neel, is this. when t.a.r.p. was originally conceived, you thought the banks were going to keep the money for how long? the reason i ask the question is
because they gave it back very, very quickly. some people think that's a good thing but clearly that was not part of the plan. >> we wanted -- our entire goal was to prevent the economy from collapsing so we wanted to put as much capital in the financial system writ large at possible and have it sit this so we designed it to be at least three years and have it sit there for a period of time. the rules changed for political reasons and pitch forks came out and they paid it back very quickly which was like a patient giving medicine back. you need the medicine to work through the system. a lot of us were concerned when the banks paid back the t.a.r.p. as quickly as they did and that was in response to politics. >> the notion that these poor banks, we hurt their feelings, all these very rich, very well protected people, get over it. that's tough. i was appalled by their hypersensitivity maybe because we're in a business where people say rude things about us all all the time but what i was told, two of
the things that were necessary to alleviate public anger, were one of the things that drove them, one, compensation restrictions and two, than anticipated their damned airplanes. i was struck by how much the ability to fly in your own plane meant to those people and how restrictions on being able to fly around was a problem and it was also the political thing but frankly, we who had voted for it, the president who then supported it, the the outgoing president, too, but frankly, we were attacked, too, it didn't occur to us to think, oh, these poor people, people are attacking them but i believe this was not stimulated by the politicians but was genuine public anger. >> in point of fairness, the house republican leadership stepped up. john boehner, eric canter, paul ryan. you all are characterizing them. >> they replaced their
negotiator because they wanted to be participants. >> they wanted no negotiator. >> yes, they did. they had spence and replaced them with lund. >> they still had a majority voting against them. >> i understand but let's give credit where it's due. >> in my experience, when the house republican leadership really cares, they do better than the minority of their own party. >> i have reservations about that characterization. i think a lot of people went to the floor on that monday and voted no because they thought the leadership had the votes to pass the bill and left the floor quickly so they couldn't be gathered back in. >> those are the republicans that -- >> i think that was true on both sides, by the way. >> no, no, not so much -- but -- >> nobody ever casts political votes on your side. >> on this one, judd, wait a second.
it's politicians and it's about politics. since you ask political questions, you're two months before an election, this is a freebie on the incumbent party. it's a free shot on goal without a goalie in the goal box and the democratic party, it was a majority, voted for -- it was not unpopular after the fact. it was unpopular while we debated it and unpopular when we implemented. it was unpopular and you can't put lipstick on that pig. the majority of our party voted for something with an incumbent president of the other party that would actually help solve a problem and the majority of the republican congress voted against it even with their own president in party. that is a very political vote two months before an election and if you don't think that's true, you don't understand how the interaction of economics and politics work. >> rahm, i'm just stunned you're
not a more forgiving person. >> i am on a one-on-one basis. i'm very forgiving of you. i was locked in a room with you for 48 hours. >> senator, let's talk about what happens with bipartisanship at midnight. take us inside the room. >> can i say, judd, you had your own view of your house colleagues where you know full well -- forget the leadership -- they were not leading their members to a yes vote to defend the economy and you had your own views where you realized they were not holding up their side of the bargain even if some of them like roy blunt wanted to. >> i have plausible deniability on that issue. >> i know the story, it's in hank's book, maybe you can retell it for a second. you're in the room. it's close to midnight. you might be there, too. i think barney's there. >> barney was, and so was rahm. >> all of you. >> i would like the deniability now.
>> this was at sort of the crux. this was the moment. this whole thing was going or not going and this man, mr. paulson, i think, was actually throwing up he was so anxious about what was happening. >> he was concerned. and rahm and i were with hank in an ante room and rahm and i went in with barney and the last issue was restitution. secretary and i made a proposal -- secretary made a proposal, he was in charge. about 3:00 in the afternoon we'd been going back and forth and neel was active in this and finally about 12:00 we couldn't reach agreement and we were throwing up our hands and it was just the three of us in the room and i remember rahm specifically saying, ok, and you and rahm went in to see the speaker and i don't think this story's really been told. and i thought it was over. i thought we'd lost it and we all knew we had to have the deal that night because the asian markets were opening the next day.
10 minutes later, the speaker came out, looked at me said, we're going your way, it's done. i don't think the speakers got credit for that. i don't know what happened in that room but believe me, if she had not done that, there would have been no deal and she's never gotten credit for it. >> for that reason, judd gregg's flight's going to leave on time today. >> let me go back. there's a fundamental difference and it is -- not just partisan. the difference between the two parties has been, it's been a movement in the republican party from the kind of mainstream conservatism of you, of bob dole, of both presidents bush, to a group that does not accept the notion that the public sector must play a significant role. our party's at their best, we know there should be a public sector and private sector and fight about where to draw the line. >> that's not the majority of our party. that may be a loud function of the party.
>> it is the part of the party that's intimidated the rest of the party in the house. i agree with that. but it's the perception of many house republicans, that's where the primary voters recalled turn out if there was a primary and that was -- >> not -- >> you just saw that happen. >> but you also saw the speaker take it to the floor. >> after a great deal of crisis, he took to the floor with a gun to his head. >> pretty big -- >> the gun was at his head. you brought it up. >> i don't want to get us off on a tangent. >> it's not a tangent. i'm sorry, this is not a tangent. this is not a small thing. i think you have a serious problem going forward to the extent to which a group of republicans in the house who do not accept the ledge missy of the function of the government have the agree of influence that they have and i think that was a factor. as far as nancy pelosi's concerned, her cooperation started earlier. in 2008, in january, george bush came to us and said we need an economic stimulus, the economy's
in trouble and pelosi came back to us and said, we need a stimulus for the economy, republicans won't support spending, they have to be tax cuts so i'm going to say yes but they're the most progressive tax cuts with earned income tax credits and there's a fundamental difference between the two parties today given the influence of the tea party on the sense of how much do you sacrifice of your own views to keep the government going and within the republican party in the house today there has been a scary diminution of that commitment. >> at the risk of not making my flight, you're absolving the president's role in building those bridges to the congress. a lot has changed since 2008. >> no, let me say this, george bush and i were not pals. i never had a serious conversation with george bush but when he sent paulson and
bernanke up to tell us things were collapsing, we responded and it wasn't schmoozing of george bush. >> i'm going to go with barney and we'll go down the line. >> barney borrowed some of my time. >> you're generous. >> he is my former chairman so i have to be. >> j.p. morgan is in the midst of this $13 billion settlement, in part related to assets it acquired during the financial crisis, both bear, stearns and washington mutual. you have said publicly and i'm curious if your view has changed since we last talked given details that have emerged about whether you think government should be fining the company for buying -- not for buying those assets but for whatever sins happened to those assets that were purchased during the crisis
with a little bit of push if not a lot of bit of push from -- >> it's been refined. i've got more facts. i would say, first of all, to my recollection, the washington mump and bear, stearns were not the same. there was much more voluntary activity on the part of j.p. morganchase for washington mutual and similar with bank of america. bank of america was pushed into taking merrill lynch. buying countrywide was one of the worst ideas he had and it was his idea. i differentiate. with regard to wamu, no, that's totally there. with regard to bear, stearns, you used the word fined. i think it would be not just unfair but bad public policy to fine them for having acqueases to serious pressure from the federal financial people to take over bear, stearns. leave aside equity, there may be another request by other federal financial officials to a bank to step in that way and they'd be
much less likely to be cooperative. to the extent that you can say there are people to be made whole because of things bear, stearns did, that's different but as far as penalizing them because of what bear, stearns did before they were pressured into accepting it, i think that's a mistake. >> mr. mayor, what do you think of that? the next time the treasury secretary calls a bank during a time of crisis, do they hang up on him? >> i'm not -- i don't know what they would do. i can't speak to that. i do think, i want to emphasize what barney just said on this one part -- which i think is an important point -- we are at a place that j.p. morgan had to get bear, stearns because you would have had the lehman moment earlier. now that bear has j.p. morgan because they did something they didn't initiate, we solicited
them to do, now we're holding them legally responsible for what we asked them to do on that time so on that piece of the settlement, i don't know how much it specifically represents, i think that's -- i mean you're basically -- the government's being given the position to look back and rewrite the rules of what actually contextually happened in a way and bearing people responsibility when actually they didn't come forward with the idea of buying bear, stearns and absorbing them, we asked them to do it and now we're saying you're legally culpable. it's double jeopardy. >> final question, if each of you individually could have done one thing different during the crisis, either before, after, during, i don't care, individually on your own, what would it have been? we'll start here. >> i talk about this a lot. i think the communication was the hardest thing we struggled with because the way i describe
it, we had one microphone but two different audiences. we wanted to project confidence to the markets but wanted to let congress know how terrified we were to catalyze them to move but if we let the markets know how terrified we were, it would have been destabilizing. we had a muddled message. i don't have an answer to solve that but maybe better communication with the congress so they knew how terrified we were. maybe that would have made the political process easier. >> rahm? >> i haven't really thought about it. i don't know if this would have worked but maybe forcing the republican house members to put somebody in the room with us so they would have had more ownership of the final product, may have changed the context of the vote. i don't believe if you change the context of the vote this would have been popular and publicly accepted. they don't like bailing out people for decisions they had to make. >> judd?
>> i have to be honest, i think for my part and my role and where i was asked to do it, which was minor in the sense that i was just carrying senate republican water, it was a team effort and i was genuinely -- i don't think there was ever a time when i was in government, when i was governor, five of our seven largest banks failed -- i don't think there was ever a time when i was in government when people worked so consciously on both sides. it was one of the most impressive points in american history. >> we got a friendship out of it because we were locked in a room for a long time. learned a lot about each other. >> i agree with judd and i want to make one important point because people claiming bipartisanship is broken down. it's had problems but it's not systemic because we're talking, not about 1920, but five years ago in very difficult times our structure of government worked very well. i think the problems have been
political. secondly, what i would have done -- here's one point i wanted to make. one of the things people don't understand are the limitations of being in the legislature. you cannot lead from the legislature. it's partly political. give you a football analogy. the best blocker in the world who protects his quarterback is not going to get the attention of the guy who leads the league in sax. if you're in the legislation, there is an incentive to be on the attack because if you're being supportive, the executive gets credit. so that's the leadup to saying this. i regret not having fought harder for more mortgage relief in the beginning. not so much to make it politically acceptable but i believe the lack of mortgage relief became an economic drag on the economy, that that was a problem but i will say the reason i didn't was this. you have two choices at some point when you're in the legislative branch, you say yes or no. you don't say yes, only here. my conviction was i pushed as
hard as i could but couldn't pull the trigger of saying no so that's my answer. >> can i say one thing? this is an historic moment. barney used a sports metaphor, i don't think i've ever heard that in all the time i've served with him. >> i'll open it up to the audience. a hand with the bow tie in the front. please stand, state your name and the question should end with a question mark. >> my name is eric westham, fourth year at the university of chicago. i was wondering, i know that while there are 435 members -- voting members of congress and 100 senators, not all of them are experts in economics and i was wondering what sort of impact that has on any sort of discussion concerning the economy as a whole and how much that hinders effective policy. thank you. >> i want to speak to that quickly. the other panelist is alluding to this.
i don't think most people in congress knew this was coming. i genuinely don't think within my caucus and the senate that anybody thought this was somebody. people suddenly woke up and this was on top of them. it was a fascinating situation. some of us who were involved had been talking a little bit about it but nobody saw it coming in the congress. >> the reason was, to some extent, you couldn't alert people it was coming without bringing it on further. you were in that dilemma where you couldn't talk about it but to answer the question directly, the way congress usually works is, there is deference to experts. there are only a small number of experts on any issue. and basically what do do you, as a member of congress, you figure out who are the people whose judgment you trust, whose values are generally your values in terms of goals and then you follow them on the issues where they are experts.
and that is often the case, economic issues. the situation here was this transcended this. this all of a sudden broke through it but that's generally what happens is on each side there are people who have the expertise and they basically call the shots and the other members tend to follow. >> mr. mayor? >> two quick points. the congress -- the house is set up to be specialists based on your committee assignments and the senate is generalists. they don't have the same kind of distinction and i think that there's -- to echo what barney just said, there's going to be a few people, colleagues they'll turn to for their judgment and background. i will just say also this, there were not a lot of people even outside congress that had an experience with a major financial meltdown. our most recent experience as a country was a sector called the savings and loan industry not mutual funds, banks, investment
banks, the financial system and insurance companies so we didn't have it in the country, it didn't exist. let's be honest, we were making it up as we were going on the seat of our pants and that was true for us in congress, the administration as well as experts outside who were commenting and for all that, we did pretty well. >> there's a question right there, sir. >> carl tannenbaum, chief economist at the northern trust. the early editions of t.a.r.p. were relatively short on specifics. memory serves, it was a relatively brief document with a large number in it. i have a question, first, politically, as approval was contemplated, was the lack of detail one of the reasons why getting to consensus was difficult? and then one of the pivotal moments i think as we think back on t.a.r.p., is that it had been intended first to purchase bad assets out of the banks and find
investors behind them and then it pivoted to being a bank recapitalization tool. at what point that was decision made and on what basis because it ended up being very important. >> both points. the original bill was three pages but that was never intended to be a full bill. that was a description of the authorities we needed so we sent it to congress saying, here are the authorities we need, let's craft a bill. obviously, the interpretation of that especially in the press was this was the full bill and it was never intended to be the full bill. in terms of the pivot from buying assets to investing in equity. congress moved in lightning speed just two weeks from when we asked for the authority to ultimately when we got it which is extraordinary but within those two weeks markets cratered and we intended to buy the assets but as markets collapsed beneath us, we had to move much, much faster awdged that's why we made the change but to our credit and congress' credit, we designed the authority to be broad enough that we could make those decisions if we had to.
>> there was consensus. you mentioned spencer bachus, in the meeting, he was the senior leader of the republican minority at the time and when presented with buying out the assets, he was one of the first in the meeting raise the notion of how about capital infusion so there was consensus, no fight, let's give the secretary authority to do whichever, either, both, some mixed so that did grow out of the deliberations in that room. we said there was necessity to do something about compensation. jack reed talked about need for repayment. and there was general agreement we needed some of these. compensation became a little bit controversial but the notion of going from buying the assets to capital infusion grew out of a conversation and there was general agreement. we don't know what the hell's going to happen, let's give them the authority to do what makes the most sense and there was no
criticism that i recall when he decided and when was the decision made, as i recall, after the bill had passed and the secretary had the authority. >> when it shifted gears from a three-page document to a very long document was when a decision was made to mark up the senate bill, that was made thursday morning. it was a big mistake but that's the way folks wanted to go forward so we spent most of thursday trying to clean up the senate bill. as to the flexibility, as i recall, the only thing that secretary paulson asked of our side and the senate, in the negotiation, he wanted two things. he wanted a lot of money and total flexibility. those were the standards we were told to fight for. >> we're going to squeeze in a couple of more questions today. >> ari tandler, second year majoring in economics and political science. in the past when there have been historical problems and solutions that have come up and updated into ideology now regarded as facts -- worked for
ronald reagan, it will work now. how do you reconcile past competing ideologies into making a plan to resolve the current crisis and can pass through the government? >> i'm glad to get that question. i'm very troubled right now that we're not doing that. i mentioned this, a little off topic, but i am about to submit a comment to the regulators dealing with residential mortgages, very much opposing what appears to be their major proposal. we talked about this before, they're in the process, it looks like, their favorite proposal is one that would effective do away with risk retention in home mortgages and allow 100% securitization. we set up three categories of mortgages, made it impossible make them. the great majority, you should make, keep 5% of the risk if you're going to securitize them and super duper ones with no risk retention. they're collapsing, too.
i'm surprised at how quickly people have in my judgment forgotten what was one of the major causes and i'm just somewhat disappointed, hoping they're going to change this so the answer is there's no pure guide against this. there's a lot of political pressure both from the banks and from the loan advocacy groups. they are channeling a "wall street journal" article a few weeks ago that attacked me on cutting sub prime loans because i was keeping poor people from buying houses so i don't think we've found a way to do that effectively. >> sir? >> ken monahan. neel mentioned at the beginning of this that american democracy is very good at fixing problems but not heading them off and the preceding panel talked about the issue of government involvement in the mortgage issue that are ongoing. can you think, is it a
constitution issue? how should the government go about trying to address the things it knows that are on the horizon now, having learned what it just learned from not heading off this thing. is it possible or are we doomed to repeat it? >> my view is that human civilizations are prone to mass delusion. it's funny but not funny. i bought a house in california in 2005. i didn't see the housing bubble coming and i think if alan greenspan, in 2005, had said we have a housing bubble and i'm going to clamp down on mortgage lending, these members have been outraged their members would have been kept from participating in the american dream so it's hard for one omniscient person to see something when nobody else sees it. we have to do our best but human history is full of financial crises because as a society we are prone to delusion and unfortunately it's probably going to happen again.
>> rahm? >> let me say, i don't think, to your question, take two events. in 1983, there was three months left to the social security trust fund being able to pay. it took the three-month window to force a set of decisions that ronald reagan and tip o'neel and baker worked out. judd said something, true at one level, but i disagree, more time to explain the t.a.r.p. i don't think our congress regardless of who got blamed, who voted, with more time, would have been more thoughtful. you needed that crisis moment to move. take a look at infrastructure, basic research on immigration. all of those are in our own economic self interest immediately in the long term. how are we doing at resolving them? you need kind of a moment to crystallize and force an action that when you're being thoughtful you can see it in
front of you but you can't do it. that, unfortunately, is how the political system works. on the other hand, this gets to what barney did say and i joked a little bit, it's serious. you're not going to get leadership out of the legislative branch. they're very good at corralling votes. leadership comes out of the executive branch that provides a road map, direction, sets goals that the legislative then run and move their -- move people towards the barn door and that is how the process works and creating that moment is part of what leadership out of the executive branch can create to actually come up with solutions a little ahead of schedule. >> oneness? defense of democracy, i don't see nondemocracy doing all that much better in anticipating problems, either. i wouldn't blame democracy but lack of human forsight and inability to see what's going to happen. >> diane swonk. >> neel, you made the point about needing to invoke confidence in financial markets
and terror in congress. is maybe that lack of messaging that didn't happen then part of the problem today in terms of gridlock and what it's costing the economy today? >> the situation, we talked about this earlier, we're not at a -- the crises we're facing right now are self-inflicted, created by political dysfunction and so i think the situation is fundamentally different today but i share judd -- ultimately i share his optimism, that i think if there were a national crisis, a real crisis, you would see people come together and congress act in a more rational manner. >> final question over here. >> stuart lucas. how do we create the political circumstances to reset re-districting to a point you guys were raising earlier. >> mr. mayor? >> look at california, arizona, iowa. take it out of the legislative body. to do it, if you think my analysis is right about what the
problem is, that's the first question, i happen to think. then what you have to do, where it has succeeded -- california is an example, arizona's an example, iowa where you bring competition back in. >> referenda. >> you got to basically take the state legislators out and put it into a court/nonpartisan analysis and that's what i would do. >> before we go, because i see you have your paper there, barney. i'm going to tee this up for you. >> thank you it. >> you want me to tee it up for you or you just go? >> you tee it up. >> is this going to the floor? >> no, i -- >> you can't go to the floor anymore. >> i can go to the floor but i can't talk so the hell with that. >> you were about to release a paper. >> it is an official comment on regulation before the agencies that are in charge of the statute with dealing with risk